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INCOME TAXES
12 Months Ended
Aug. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
We utilize ASC 740 to account for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.
Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.
The components of the income tax provision for the years ended August 31, 2022, 2021, and 2020 were as follows:
(in thousands)202220212020
Current
Federal$2,518 $1,315 $2,098 
State611 450 478 
Foreign(228)166 39 
Total current tax expense2,901 1,931 2,615 
Deferred   
Federal(4)(379)(428)
State(265)(249)(132)
Total deferred federal and state(269)(628)(560)
   
Total$2,632 $1,303 $2,055 
A reconciliation of the expected income tax computed using the federal statutory income tax rate to the Company's effective income tax rate is as follows for the years ended August 31, 2022, 2021, and 2020:
202220212020
Income tax computed at federal statutory tax rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit3.2 2.0 4.1 
Meals & entertainment— — 0.1 
Stock-based compensation0.6 (6.8)(1.2)
Other permanent differences0.4 (0.3)(0.3)
Research and development credit(2.2)(1.6)(2.8)
Foreign-tax-related differences(3.2)(2.6)(1.4)
Research & credit adjustments to expense— 0.2 0.3 
Change in prior year estimated taxes(2.4)(0.1)(1.8)
Total17.4 %11.8 %18.0 %
Significant components of the Company's deferred tax assets and liabilities for income taxes for the years ended August 31, 2022, and 2021 are as follows:
(in thousands)20222021
Deferred tax assets:
Accrued compensation$563 $586 
Deferred revenue241 102 
Capitalized merger costs703 703 
Intellectual property
Research and development credits347 66 
Foreign tax credits101 — 
State taxes128 72 
Allowance for doubtful accounts20 
State tax deferred28 80 
Total deferred tax assets2,121 1,636 
Less: Valuation allowance— — 
Deferred tax asset2,121 1,636 
Deferred tax liabilities:
Property and equipment(109)(83)
State tax deferred(30)(26)
Intellectual property(1,139)(1,456)
Capitalized computer software development costs(2,299)(1,797)
Total deferred tax liabilities(3,577)(3,362)
Net deferred tax liabilities$(1,456)$(1,726)
We follow ASC 740 with regard to our accounting for uncertainty in income taxes recognized in the financial statements. Such guidance prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, we determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and assume that the tax position will be examined by taxing authorities. Interest and penalties were immaterial for fiscal years 2022, 2021, and 2020, respectively. We file income tax returns with the IRS and various state jurisdictions as well as with the countries of India, Belgium and France. Our federal income tax returns for fiscal year 2019 through 2021 are open for audit, and our state tax returns for fiscal year 2018 through 2021 remain open for audit.
Our review of prior-year tax positions using the criteria and provisions presented in guidance issued by FASB did not result in a material impact on our financial position or results of operations.